Tax break for employer health plans a target again

Associated Press |
11/30/2010, 8:13 p.m.

Democrats struggled with proposals to curb the tax break during the health care debate, but strong opposition from organized labor won out. The compromise was a tax on high-cost health insurance plans, which won’t go into effect until 2018.

In a twist, the health care law eventually may make it easier to pry people away from employer insurance, a system that dates to World War II and has sustained three generations.

Starting in 2014, new insurance markets will make it easier for people to buy coverage on their own. These state-based “exchanges” would work like the federal employee health plan. Taxpayer subsidies will help individuals and families with low to moderate incomes pay premiums.

“Before health reform, a declining role for employers would have raised concerns,” Rivlin and Domenici said in their proposal. But well-run exchanges “will provide a viable - perhaps even superior - alternative.”

One Democratic member of Obama’s deficit commission is wrestling with the idea.

California Rep. Xavier Becerra says it’s a very different situation from the health care debate. Back then, policymakers were looking for money to pay for covering the uninsured. Now, they’re looking at rebalancing the role of government in the economy. He’s not considering health care tax breaks in isolation.

“What we are saying is that we are going to examine every tax earmark,” Becerra said. “They are all on the table. If you want to keep one, then show us how you are going to come up with the money. That’s where you really have to put your money where your mouth is.”